Battle of the brands

Today ‘Checkout’ publishes its top 100 brands survey and, while there is little change at the top of the table, leading brands are competing in a diminishing market

AT FIRST glance, it doesn’t appear that a whole lot has changed at the top of the annual “Checkout Top 100 Brands” list with the top still populated by the same big names as in years past. Coca-Cola is still sitting pretty on the top of the pile followed by Avonmore and Brennan’s. But that is not the full story.

The level of innovation and new product development taking place in the Fast Moving Consumer Goods industry is intense and consumers here could be said to be living in a golden age, with each week bringing with it a slew of new products, pioneering shopper concepts and cut-price deals on old reliables.

In challenging times, consumers return to the brands they know and trust; a reason why the top five in Checkout magazine’s list has remained unchanged for three years but relying on past glories is a dangerous game and will only get you so far. For brands, faced with rising own-brand penetration, continued consumer focus on price, and intense opposition from both new and established competitors, the message is often a simple one: “innovate or die”.

The survival-of-the-fittest mindset is best illustrated by the confectionery category. It is Ireland’s largest and is populated by powerhouses including Kraft Foods, Nestlé and Mars. Brand managers in this highly competitive sector understand the need to maintain a constant innovation stream and they are constantly developing subcategories within subcategories, promoting new product formulations, and seeking to create long-standing unique selling points (USPs).

The rise of “sharing bags” in confectionery is a prime example: a couple of years ago, the concept was the preserve of just a handful of operators. Today, most of the key confectionery brands offer some sort of sharing bag portfolio, and those that don’t are either on the verge of doing so, or looking elsewhere for the next big thing.

Nielsen’s recent ShopperTrends survey outlined the challenges brand owners have to face in what is now the fifth year of the economic downturn. According to the survey, 63 per cent say they now buy only essential items, while 58 per cent actively look for products that are discounted. A third are actively switching to cheaper brands, while 37 per cent claim that, although they “don’t know the prices” of supermarket items, they do notice when prices change. Not the best environment in which to engender brand loyalty, then.

But statistics like these only tell part of the story. The growth in private label penetration also means that brands are competing in a diminishing market. Sales of store brands are reaching levels which were never seen before in the Irish market, while advertising of own-brand ranges has also got more sophisticated; particularly around key spending periods such as Christmas and bank holidays.

Nielsen’s reports that 53 per cent of consumers have been buying more private label in the past year. When asked for the key reasons why, 68 per cent cited lower prices, and 46 per cent said that the quality was just as good as named brands; an indication of how consumer preferences are changing, and a far cry from the old yellow pack days.

Fellow market analysts Kantar Worldpanel recently estimated that own-brand currently accounts for 26.9 per cent of the total ambient grocery market (taking in anything from chocolate bars to tinned tomatoes), up from 25.2 per cent for the same period last year and 23 per cent in 2010. When it comes to frozen goods, penetration is even higher, hitting 36 per cent this summer, compared to 33.2 per cent in 2011 and 32.2 per cent in 2010. And, the experts say, it’s only scheduled to increase. Not that brands are prepared to sit back and let this happen, of course.

The milk category best illustrates the new set of battle lines that are being drawn. Over the past few years, the big brands in the category have seen their market share diminish significantly as a result of escalating own-brand penetration. However, Avonmore, the market leader in the category, and number two brand overall, has proven itself to be more than ready for the challenge, delivering new concepts (such as its Peak Fresh campaign) and products (such as Avonmore Heart Active) in order to keep itself front-of-mind with consumers. As things stand, the strategy appears to be working, with Avonmore maintaining its market share of 27 per cent (year to end April 2012, compared to 28 per cent for the same period in 2011), while the private label share grew four percentage points over the same period.

Other categories have seen an array of groundbreaking innovations. Denny 100% Natural Ham, a ham produced from only natural ingredients, has reinvigorated the sliced meats category ahead of the new school term. Heinz has rewritten the rulebook when it comes to how consumers engage with the baked beans category, via the Fridge Pack. Kraft Foods, makers of both Cadbury chocolate and Philadelphia cream cheese, has united the two to create not just a new brand (Choccy Philly) but a new category, backed by one of the most effective shopper marketing campaigns in years. Certainly no shrinking violets there.

But brands also need to ensure that they don’t pull the rug (or should that be shopping trolley?) out from under themselves by engaging too heavily in price promotion. While promotions are unavoidable in today’s value-focused culture, brands need to also communicate on matters other than price in order to gain long-term consumer trust.

Some brands can afford to dabble almost continually in the promotions game; Coca-Cola is an example of a top brand that is constantly involved in some form of promotional activity (particularly on its 2-litre multipacks) – and nobody would say that Coke has lost its edge. But establishing an intensive cut-price strategy to drive short-term volume growth can significantly damage a brand’s integrity, and can be suicide for new entrants to the market, regardless of how groundbreaking their proposition.

The typical Irish consumer may claim to be a strong advocate of brands, of private label, or of a combination of both, and care little for the battle for shelf space taking place under their noses. But it’s worth bearing in mind that most categories are dependent on major brands to set benchmarks; “agenda-setters” that lead the market, rather than follow. Without an Avonmore, a Tayto or a Jacobs to raise the bar, a brand-free marketplace could grow stale very quickly. And that’s to say nothing of consumer choice.

The life of a big grocery brand these days is akin to that of a swan: stoic and confident to the naked eye, yet paddling furiously beneath the surface in order to keep going. For the long-term health of the grocery sector, it’s imperative that they stay above the water line.

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